Investment panel orders Venezuela to pay $1.6 billion to Exxon Mobil for seized assets

Associated Press

An international arbitration panel has ordered Venezuela's socialist government to pay $1.6 billion to Exxon Mobil for the seizure of a major oil project in the South American country and other losses.

It is the largest award yet in a backlog of costly complaints against Venezuela over a wave of nationalizations in the past decade.

Continue Reading Below

Venezuelan officials did not comment immediately on the ruling.

Exxon said in a statement that the decision by the World Bank's investment dispute panel confirmed that Venezuela failed to provide fair compensation for the Cerro Negro project it seized in 2007 after the company failed to enter in a partnership proposed by state-owned PDVSA.

President Nicolas Maduro's government is currently battling more than 20 similar demands at the World Bank by foreign companies as a result of the drive by his predecessor, the late Hugo Chavez, to assert state control over the resource-rich economy.

In a similar complaint, the International Centre for Settlement of Investment Disputes ruled Sept. 23 that Venezuela must pay $740 million to Spokane, Washington-based Gold Reserve for taking control of a mining project in 2008.

The award announced Thursday was well below what Exxon had been seeking but would still prove difficult for Venezuela to pay as declining oil production, capital flight and 60 percent inflation are depleting the country's cash reserves.

Analysts said that, rather than shun the ruling, Venezuela is likely to appeal to buy time while it negotiates more favorable payment terms so as not to lose access to international credit markets on which it depends to finance spending on social programs.

The International Chamber of Commerce previously awarded Exxon more than $900 million in damages for the expropriation of Cerro Negro.